The Widening Trade Deficit: Should we worry?
Should we be worried that the trade deficit keeps on widening on a quarterly basis or is it to be expected? This is a serious question that government should ask itself because the country at large is extensively affected.
The latest trade statistics revealed that the trade deficit has once again widened by N$9.9 billion in the second quarter of 2015.
Honestly this is worrisome, and it only means government should hurry up with adding value to our own products.
How long will we keep on importing more than we export? How is this benefiting our local economy? Namibia is a middle income country, and we only have a population of 2.2 million people. When you think about it our economy it is rich, but yet we import an extremely high amount of goods.
Before I divert too far along, the statistics also revealed that the trade deficit widened by 41.9%; this increase is a bit too high. This is comparing it to the preceding quarter whereby the trade deficit stood at $6.9 billion.
Our cry for an industrialised economy is real, we cannot keep on importing more and more while not making a profit from our exports.
The worth of imports is currently N$23.8b whilst the exports are valued at N$13.9b, again I say, this is worrisome. Is this even why government debt keeps on hiking?
We spent an awful amount of money on imports, while we as a nation we can barely break even.
According to the latest Bank of Namibia statistics, government debt rose by 19.02% and currently stands at N$37.31 billion. It rose from N$35.74 billion on an annual basis.
In an interview with The Villager recently, Finance Minister, Calle Schlettwein, said government is seeking to find other ways to increase its revenue. My question is how is government planning on doing that?
As we speak, revenue from the Southern African Customs Union (Sacu) is predicted to decline by about N$16b in the next two years from the current N$51.02b to N$36.51b.
This move will put serious strain on the revenue streams of member states (South Africa, Namibia, Botswana, Swaziland and Lesotho).
Currently, the only way the country can increase its revenue streams is by strengthening its tax regime and compliance in order to cushion themselves from the pending revenue dip.
What other measures can government take up to ensure that the country makes sufficient revenue?
Again I shall reiterate this, industrialisation is of utmost importance, we need to be able to add value to our own products and sell our own products instead of exporting them. I encourage other Namibians to be proudly Namibian, support local businesses and buy locally made products.
Oh, I think it is worth noting that in terms of supporting Namibian products, recently it emerged that the dairy industry is in dire need.
Larger markets are currently dumping their products in Namibia, selling them for less compared to their normal rates. This in turn leads to the Namibian dairy products being in excess, hence the dairy industry is suffering heavily due to this.
To add on, local farmers and their dependents stand to lose close to N$10 million in income if the trend continues. It is really sad to know that our industry is suffering like this and yet we locals opt to buy cheap imports.
Government needs to have stricter measures in place to curb the increase in imported goods, it needs to ensure that artificial demand by all means is curbed as well. Yes, Namibian products are expensive but we are supporting our local economy and we are keeping our money at home instead of creating wealth for foreign economies.
Our export revenue has declined heavily as the overall value fell by 39%. This is 19% more than the decline in import expenditure, which fell by 20%. Nevertheless, the fall in imports was not enough to counterbalance the deficit. The export revenue stands at N$22.7b in the second quarter of the year, N$8.8b less than the amount recorded in the same period the preceding year.
Correspondingly, expenditure on imports were valued at N$29.7b, this was however N$5.9b less than the amount recorded in the preceding year during the same period.
Thus, the widening deficit continues to underscore Namibia’s dependence on imports, and her vulnerability to any slowdown in supply from her largest trading partner, South Africa.
What is the country lacking? Skills? Please do not tell me the finances because Namibia is a rich country.
We have extensively discussed the Industrial policy which basically refers to a battery of policies intended to encourage exports, attract foreign direct investment, stimulate innovation and selecting winners in industries with high export potential.
We are 15 years down the lane before vision 2030 kicks in and at the pace that country is moving, I am not sure whether we will be industrialised by then.